The purpose of this memo is to provide information and guidance in the event of a federal government shutdown resulting from Congress failing to adopt a temporary funding measure for the federal fiscal year 2014 (which begins October 1, 2013) and/or failing to increase the federal debt ceiling by mid-October. These events could create some potential challenges for spending accounts in the General Federal Grants Fund, for which the Executive Office for Administration and Finance (A&F) and the Comptroller’s Office (CTR) are requesting information from your agency on prospective impacts and mitigation actions (identified below).

Background

The federal government has not adopted a formal budget for its fiscal year 2014. Budget discussions between the House, Senate and President Obama continue. While there is a reasonable chance that a CR (Continuing Resolution) will be adopted before October, we must be prepared for the possibility that federal government operations and/or federal funding for states will not be authorized. This memo further describes the potential impacts of a shutdown, suggested actions to be taken by agencies and the information being sought in preparation for such an occurrence.

Federal Funding Received by the State

Programs of federal financial participation (FFP) for which the accounting and reporting is done via MMARS, can be placed into three categories:

(1) Federal financial participation for joint federal-state programs, where the Commonwealth appropriates 100% of the total program, and the FFP is accounted for as reimbursement revenue (example: Medicaid),

(2) Federal financial participation where the Commonwealth authorizes spending from a specialized fund and again the FFP is accounted as reimbursement revenue (examples include the federal highway capital project fund and other special revenue funds), and

(3) Federal financial participation that is itemized, on a grant-by-grant and account-by account-basis, in the General Federal Grants Fund (referred to as MMARS Fund 0100).

Our examination indicates that this third category, the General Federal Grants Fund, is most at risk of disrupted fiscal operations if the federal government were to shut down. The measures we are asking agencies to take below directly relate to this category of federal funding. We expect that the likely impact of a federal shutdown on categories #1 and #2 would affect the state’s cash flow, which will need to be managed centrally. Where your agency believes further impacts may result from a shutdown, please contact A&F and CTR through the contact information listed below.

Review Accounts in Federal Grant Fund.

If your department has spending accounts in the General Federal Grants Fund, which is designated fund 0100 in MMARS, we request you take the following actions:

For each such grant/account, contact the relevant federal granting department to get updated information on the amount and timing of the expected federal grant awards and to confirm how funding would be affected by a federal government shutdown; and

If you conclude the continuation of your grant is unlikely, prepare actions to discontinue spending against such grant. To the extent continued spending depends on further federal budget legislation, you should not incur obligations against the grant beyond the date through which the federal granting department has made funding available.

We currently estimate that roughly 4,100 benefited and non-benefited employees are paid from federal funding sources across state government. By COB Monday, September 30th, we request that agencies provide to us any concerns that they may have with available federal funding, particularly as it relates to their ability to make bi-weekly payroll for employees currently paid from federal sources. We ask that agencies provide A&F with steps they can take with respect to utilizing other funding sources currently available to them to fund payroll costs, and what the impact of utilizing such funds may be on other state-operated programs and services. To support payroll costs and the related services that would be impacted by a federal shutdown, agencies should assume that no additional state funding will be available.

It is the responsibility of each department to manage its respective federal grants. Until you notify CTR otherwise, it will assume each grant in the General Federal Grants Fund will have ongoing funding, and therefore will allow transactions in MMARS and performance of the central draw (for CMIA) in a “business-as-usual” mode.

As you conduct your grant-by-grant review, the information should be sent to Natalie Sanchez, A&F Federal Grants Analyst (who can be reached at (857) 400-5428 or by email at natalie.sanchez@state.ma.us) and Taneka Simmons, CTR Director of the Federal Grant and Cost Allocation Bureau (who can be reached at (617) 973-2606 or by email at taneka.simmons@state.ma.us). Below, we have embedded a feedback form you can use to transmit the information we request to Natalie and Taneka. Further guidance will likely be provided to state agencies once the prospects/impacts of a federal shutdown become clearer over the weeks ahead.

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